A Declaration of Independence in International Trade
Rethinking and plain speaking about the costs of “free” trade
Sen. Jeff Sessions says he’s gained insight on international trade by reading “The Betrayal of American Prosperity,” by Clyde Prestowitz. He also recommends “American Made,” by former Nucor Corp. CEO Daniel DiMicco.
We spoke with U.S. Sen. Jeff Sessions in mid-June, on the subject of the proposed Trans-Pacific Partnership Agreement. At the time, opponents of the multinational agreement, including Sessions, had lost their battle to deny President Barack Obama fast track authority to sign the pact. Congress has yet to vote on a final implementation bill. Some say chances of a denial by Congress are much reduced now that the president has signed it. Others say it’s far from a sure thing, since fast track authorization only passed through Congress by the narrowest of margins.
I supported the last Korean trade deal. President Obama signed it and promised our exports would increase by $10 billion a year. That was in 2011. As of 2015, our increase was more like $37 million a year. And imports to the U.S. were increased by $15 billion, so that the trade deficit has increased dramatically since we signed that agreement. In 2015, our trade deficit reduced our GDP from $18 trillion to $17.3 trillion — three quarters of a trillion in lost production. I voted for the U.S.-China Trade Agreement in 2000. They used the CEG economic model, which promised the trade deficit would decrease. Instead, it increased by $169 billion from 2009
These things caused me to reverse my position on trade deals. Our allies are fundamentally mercantilists and not free market people. They seek to gain an advantage in our market for their products. They want to export their unemployment to the U.S. in the form of exports to
The Trans-Pacific Partnership proposal is over 5,000 pages of agreements, and nobody in Congress has bothered to read it. In many ways it is unintelligible. Under the Rule of Origin Requirements, only 45 percent of finished products have to be produced in a country to qualify for tariff protections, and that’s going to allow the export of jobs.
The foundational study by the Peterson Institute for International Economics that shows a positive impact on the U.S. economy uses a CGE (computable general equilibrium) model that’s flawed and inaccurate. One of the assumptions they make is that, over a 15-year period, unemployment will remain at 4 percent. But the yearly unemployment rate has been above 4 percent in recent years even before the TPP.
With many free trade people, you are in a theoretical world: It’s almost a religion for them. Ask one of them if it’s OK for someone who refuses to buy from him to sell to him everything he can at a low price. If he says “Yes,” then free trade is a religion to him but he doesn’t care what sin is.
We are allowing them to gain an advantage, and maybe 25 years ago we were strong enough that we could sustain it. But we have the lowest percentage of Americans actually working today than in the last 40 years, and it fell significantly again last month (May).
One of the real results of these multination trade pacts is it makes it easier for the multinational corporations to move their manufacturing to foreign countries. There is no doubt about that. The interests of global companies seem to be harmonious with the interests of America. But they have already transitioned outside of the U.S., and when we negotiate a trade deal we can’t really totally make it to the benefit of American workers. American workers can’t be moved overseas. The National Chamber of Commerce is strongly committed to this (TPP), and, although a lot of their members don’t benefit, they remain silent. It’s not a universally pro-business deal.
We’re at a time in this nation when we cannot afford to lose a single job to unfair trade. The American people are suffering and wages are still down from 2000. The percentage of Americans working is way down and that’s counting part-time employment in those numbers. The unemployment rate that is reported has ceased to be a valid number. We have low job numbers. People have dropped out of the workforce. There is no doubt about it that real unemployment is growing, and the mainstream media refuse to talk about this issue. It’s virtually blocked out of the public debate. But working Americans are seeing it.
Too many members of Congress spend too much time with international business people — who are very nice and make persuasive cases for their side — but not enough time considering the impact on the average working American, who does consider this impact. It’s not as corrupt as some say, but it’s unhealthy in that the voices of the business interests get heard so much. For some reason, the big media companies, such as the Wall Street Journal, are religious about free trade, don’t care about anything except reducing barriers. But a healthy nation has got to have a healthy manufacturing sector.
Wages are down by 6 to 7 percent since 2000 for median income people. We have a lower percent of Americans working than we have had in the last 10 years, and it continues to decline. We need to create 100,000 jobs a month. Instead, 84,000 Americans dropped out of the labor force last month. True unemployment is 9.7 percent. It’s hard for me to understand why the workforce participation rate is not the key number. It’s a serious indicator of an unhealthy situation. We’re seeing an accelerating rate of people dropping out of the workforce. It hides the true unemployment rate. If you are not signing up for unemployment or sending out job applications, you drop off the rolls.
The candidate who talks about this in the most persuasive way will come out the winner in November. There are more working folks on salary who vote than entrepreneurs, and that’s just a fact.
If we have trade agreements, they should be bilateral and we should be able to extricate ourselves from them and need to monitor them to see that they comply on their side of the bargain, which we haven’t done as a nation.
With individual trade agreements, we have the ability to eyeball our trading partners, and if they are not consistent or are manipulating by use of subsidies, we can confront them and pull out if it’s no longer worthwhile. In the practice of law, contracts don’t exist beyond the time it benefits both parties. But once you are in these multinational international bodies, it’s very hard to get out.
With the TPP, there is a commission that sets tribunals and subcommittees as they choose and can handle disputes, and each country has one vote. We get one vote, Vietnam gets one vote, Chile one vote. And they create an international body that has an impact on the lives of Americans, when Americans have never voted to give this international body that power. It puts us at a disadvantage. Even the United Nations gives us more clout. The last thing we need is another international commission that we have to grovel to. I strongly believe that this has the earmark of a nascent EU, and Europe is already feeling the stresses from that unwise union.
Once they pass the TPP, then they’ll turn to Europe and the Transatlantic Trade and Investment Partnership (TTIP) with our EU allies and the Trade in Services Agreement (TiSA) after that. Europe has been analyzing this and support for it has plummeted in the last year from 55 percent down to 17 percent.
Chris McFadyen is the editorial director of Business Alabama. Tasha Dooley is a freelance contributor based in Baltimore.